GBP/EUR – Softens on Weak Industrial Output
Although campaigners for both sides of the EU referendum debate have stepped up operations now that there is only just over 6-weeks to go, ‘Brexit’ concerns have eased significantly as the number of high-ranking global officials endorsing the ‘remain’ campaign outnumbers those urging the UK to leave the European Union. However, the British unit has been outperformed by most of its closest rivals thanks to a succession of disappointing ecostats. On Wednesday data showed that both Industrial and Manufacturing Production saw slower-than-anticipated growth in March. With UK industry returning to recession, many fear that UK second-quarter growth will be slower than originally anticipated.
GBP/USD – Steady Ahead of BoE Rate Decision
The GBP/USD exchange rate has been comparatively range-bound over the past week thanks mostly to reduced demand for the US Dollar. With several Federal Reserve policymakers stating that the current benchmark interest rate is appropriate, speculation of long-term delays to a cash rate increase has significantly limited USD appeal. Even increased demand for safe-haven assets amid global stock volatility and fluctuating commodity prices hasn’t been enough to sustain USD appreciation. The GBP/USD exchange rate is likely to see significant volatility on Thursday following the Bank of England’s (BoE) trio of announcements. The BoE will publish its rate decision, meeting minutes and quarterly inflation forecast simultaneously. Although the central bank is not expected to make any changes to policy at this time, the meeting minutes and inflation report will likely give clues as to policymaker outlook.
USD/GBP – Federal Reserve Speeches in Focus
Whilst the Bank of England’s ‘Super Thursday’ is likely to have a significant impact on the USD/GBP exchange rate, there is likely to be increased volatility during the North American session with several Fed officials (Loretta J. Mester, Eric S. Rosengren and Esther George) due to make speeches. If they continue to parrot Chairwoman Janet Yellen’s assertion that it is important to be patient, the US Dollar is likely to decline. Looking further ahead, Friday’s US Advance Retail Sales and University of Michigan Confidence reports should provoke USD volatility.
EUR/USD – Advances Despite Underwhelming Eurozone Data
Europe’s immigration crisis is far from resolved and there are increased fears that Greek debt issues will force a re-examination of the potential for a ‘Grexit’, but the Euro still advanced versus most of its peers on Wednesday. The appreciation can be linked to speculation that the Fed will look to delay tightening monetary policy for a considerable time to come. Additional gains can be linked to easing ‘Brexit’ concerns after the European Central Bank (ECB) announced that it will be undergoing a thorough investigation in to how major Eurozone banks will prepare for the possibility of a ‘Brexit’. The next major European ecostat to look out for will be Friday’s first-quarter German Gross Domestic Product report.